Strategies For Efficient Marketing For Compulsory Insurance Services In Nigeria (A Study Of Selected Insurance Companies)
Insurance industry is the back bone of a country’s risk management system. Yet only few people purchase genuine insurance policies in Nigeria. In Nigeria, most motorists do not purchase genuine insurance policy, thus endangering the lives of other road users. Despite frequent fire disasters in several markets in the country, small scale entrepreneurs are not aware of the importance of genuine insurance policies in Nigeria. The study investigates the strategies for efficient marketing for compulsory insurance services in Nigeria using a case study of selected insurance companies. The study shall also design measures that can improve the sales of compulsory insurance in Nigeria. Material and methods: this study was conducted in Nigeria. Trust theory and social system theory served as the basis of its theoretical underpinning for this study. Newspapers, journals, field observation and literature were reviewed. Result: delay in payment of genuine claims by insurance companies, numerous clauses on insurance policies, ridiculous cutting of rate by insurance companies, poor awareness of the importance of purchasing genuine insurance, and accessibility of insurance companies by rural dwellers are among the challenges of selling genuine insurance in Nigeria. Conclusion: insurance companies should employ grassroots marketing to enlighten the public on the importance of purchasing genuine insurance policies in Nigeria. Micro insurance products should be introduced, Insurance policies should be a requirement for bank transactions, enrolment of students in school and the federal government of Nigeria should enforce the purchase of genuine insurance by motorists in Nigeria.
Table Of Content
- Title Page
- Table of Content
- 1.1 Background Of The Study
- 1.2 Statement Of Problem
- 1.3 Objectives Of The Study
- 1.4 Research Questions
- 1.5 Statement Of Hypotheses
- 1.6 Significance Of The Study
2.0 Literature Review
- 2.1 Conceptual Review
- 2.2 History Of Insurance In Nigeria
- 2.3 Theoretical Background
- 2.4 The Challenges Of Selling General Insurance In Nigeria
- 2.5 Strategies For Improving Sales Of General Insurance In Nigeria
- 2.6 Significance Of Customer Satisfaction In Insurance Industry
- 2.7 Dimensions Of Insurance Industry Performance
- 2.8 Benefits Of Insurance Industry
3.0 Research Methodology
- 3.1 Research Design
- 3.2 Target Population
- 3.3 Sampling And Technique
- 3.4 Instrument For Data Collection
- 3.5 Data Analysis
4.0 Results And Discussion
- 4.1 Results
- 4.2 Discussion
5.0 Conclusion And Recommendation
- 5.1 Conclusion
- 5.2 Recommendation
1.1 Background Of The Study
Insurance industry is the backbone of a country`s risk management system, since it ensures financial security, serves as an important component in the financial intermediation chain, and offers a ready source of long-term capital for infrastructural projects (Ujunwa, 2011). Yet, insurance has remained one of the least purchased items in the Nigeria financial market and records revealed that only about 10% of Nigerian population has insurance of any sort (Ebitu, et al, 2012; Wilson, 2004). This low patronage of insurance products has become a problem not only to the insurance industry, but has also affected economic development (Ibok, 2006), and growth of small and medium scale industries in Nigeria.
Insurance is a major financial intermediary and a key source of long-term capital which encourages growth in the capital market (Catalanetal, 2000; Impavido and Musalem, 2000). Globally, the insurance industry has witnessed a significant growth as reflected in the number of policies done each year (Beck and Webb, 2003). In Nigeria, insurance serves as a catalyst which mitigates the volume of risk associated with loans and transactions in the financial industry. This implies that, insurance is meant to indemnify a client who uses his/her property as collateral for collecting loan from a financial institution. This gives the financial institution confidence to give out loan to small scale traders. Insurance is, therefore, in tune to promote the growth of small- and large-scale industry as it provides stability by allowing large and small businesses to operate with minimal risk of failure.
The contribution of the insurance industry to Nigeria`s Gross Domestic Product (GDP) rose by 40% between 2010 to 2012; going up from 0.5% in 2010 to 0.7% in 2012. The number of insurance policies also grew from 0.5million in 2010 to 1.5million by 2011 (Fintell. 2016). In spite of this growth, when compared with other advanced economies in the world, there is still room for growth in the Nigerian insurance market considering Nigeria population size. According to Oshinloye et al, (2009) in Elundu, (2013), the importance of insurance in any nation`s economy cannot be undermined as no country can experience any meaningful development without the presence of formidable insurance industry. This makes Nigeria insurance industry indispensable irrespective of its quota to the Gross Domestic Product (GDP).
In the view of Ezirim and Maoghalu (2002), the insurance industry is a tool for economic growth and development. It is vital to the wellbeing of and smooth functioning of a modern economy. In addition, Oba (2003) opined that insurance is a major index for measuring the level of development of a nation`s wealth and plays very significant roles in the mobilization of investible resources of an economy. Considering the benefit of insurance to individuals, small scale entrepreneurs, national growth and development, it is therefore pertinent to examine the causes of low patronage of insurance in Nigeria. This shall be discussed as the challenges of selling general insurance in Nigeria. This paper will also recommend measures for tackling the challenges of selling general insurance in Nigeria.
In Nigeria, insurance can be divided into 2 major categories. The life insurance in Nigeria has several schemes. The life insurance is designed to compensate the family of the insured on occasion of death before the expiration of the life insurance policy. But if the policy expires while the insured is still alive, the insured will be given his/her contribution after the insurance company has collected their premium. In Nigeria, there are various life insurance schemes or products which could be obtained by private individuals and corporate organizations. The monthly or quarterly cash saving plan is the most popular and accepted life insurance policy in Nigeria. It is designed in a way that the insured makes a monthly or quarterly cash contribution to the insurance company through it agent(s) with the aim of collecting the contribution after a specified period of time (minimum of 1year). The monthly or quarterly cash contribution life insurance policy/scheme is most often obtained by individuals. If the insured dies while the policy is on-going, the contribution will be given to the beneficiary. But when the beneficiary is less than 18year old, the insurance company will have to wait until he/she gets to 18years.
While corporate organizations often obtain key-man life insurance policy for their executive and management staff. Group life insurance policy is also obtained by corporate organization for their general workers especially those at technical positions. With the group life insurance policy, the medical bill of the insured is paid by the insurance company in time of accident, however when a worker dies while on duty or on the course of performing his/her duty, the insurance company pays a compensation to the company where the individual has worked. The company in turn remit such compensation to the family of the diseased depending on the company`s policy of operation.
The second category of insurance in Nigeria is the general insurance. The general insurance is all non-life insurance policies. The general insurance unlike the life insurance is meant to indemnify the client in time of loss. While the life insurance is meant to compensate the family of the insured if the insured dies while the life insurance policy of the insured is still active, the general insurance is meant to indemnify the client in time of accident. Most time, it has been observed that general insurance is meant to better the lot of the insured/client. For example, in time of fire disaster of an old building with a genuine fire insurance cover, the insurance company will pay for loss based on the estimate of repair which will have been collated from current prevailing market prices. In such case, modern equipment would be used for construction of such building as against the outdated equipment that was used by the insured for construction of the insured building. By such act, the insurance company has not only paid the required claim, but also improved the condition of the insured.
Another example is the case of vehicle accident. If the vehicle has genuine insurance policy, the client would be indemnify based on the current prevailing market prices of the vehicle parts. The parts that would be purchased at this point are new parts and not outdated ones that were on the vehicle before such loss occurred. Some insured whose vehicle does not have certain accessories often include those accessories when filing claim. When insurance company pays such claim, then insurance can be said to have improved the condition of the insured vehicle. The general insurance includes the following; vehicle insurance, fire and special peril insurance, marine insurance, burglary insurance, householder insurance, public liability insurance, plant all risk and machinery breakdown insurance, cash in transit insurance, goods in transit insurance, bond insurance, group personal accident insurance, teen personal accident insurance, and others.
The high number of business closure due to fire disaster and frequent car accident is a signal that basic infrastructure to mitigate peril and to indemnify individuals after loss of goods, cash, vehicles or other type of accident is grossly inadequate. Researchers more recently have begun to look at how to improve insurance patronage in Nigeria (Atubi, 2016; Ebitu et al, 2012; Ibok, 2006). It is against this background that the following research questions were addressed by this study. What are the challenges of selling general insurance in Nigeria? What are the necessary measures for curbing the low patronage of general insurance in Nigeria?
1.2 Statement Of Problem
Insurance industry is generally seen as the backbone of any country’s risk management system, since it ensures financial security, serves as an important component in the financial intermediation chain, and offers a ready source of long term capital for infrastructural projects. Omar (2005) argues that the insurance industry ―mitigates the impacts of risks and positively correlates to growth as entrepreneurs cover their exposures, otherwise risk-taking abilities are hampered‖. Insurance also promotes the growth of small-scale and large-scale firms as it provides stability by allowing large and small businesses operate with a lesser risk of volatility or failure. Insurance is also very important to the financial system. In collecting relatively small premium from the insured in the economy, insurers are able to pull together large funds that could be invested for short- and long-term periods (Obasi, 2010). Such long-term funding of the economy is very critical for economic growth, and the deepening and broadening of the domestic financial system.
The essence of the 2003 and 2005 insurance sector reforms and consolidation in Nigeria was to ensure a strong, diversified and reliable insurance sector which ensures the safety of insured (clients) premium, play active developmental roles in the Nigerian economy and be competent and competitive player in Africa, regional and global financial system. The Nigeria experience shows that the insurance industry is still not performing as expected amidst the double barred reforms by the federal government of Nigeria.
Many scholars point negative attitude of Nigerians toward insurance companies as major reasons for the low patronage. This poor attitude of consumers developed as a result of high incidence of non-claims settlement by the insurers. This tradition of defaulting in claims translated to some form of bad publicity and significant erosion of public confidence in the industry. Insurance policy documents still carry clauses that breeds distrust with customers (Obasi, 2010).
Marketing professionals suggest that customers use a product or service because they have a need, or because it provides a perceived benefit. For a business to be successful, the products must be built around the needs of the customers. Trying to persuade the consumers to buy products that will not solve their problems is an exercise in futility. As part of the strategies to improve the image, dwindling sales and market share trends faced by the insurance firms in Nigeria, it is imperative to track and measure factors that determine customers’ satisfaction in insurance industry. Specifically, we need to find answers to why customers are lethargic to insurance products in Nigeria? What problems do the current, prospective and lapsed customers want insurance firms in Nigeria to solve? What do customers actually like or dislike about insurance products? These questions are the central purport of this study.
1.3 Objectives Of The Study
The main objective of this study is to assess the strategies for efficient marketing for compulsory insurance services in Nigeria using a case study of selected insurance companies.
The specific objectives are outlined below;
- To examine the challenges of selling compulsory insurance services in Nigeria
- To propose strategies for efficient marketing of compulsory insurance services in Nigeria
- To ascertain whether the strategies adopted for efficient marketing have significant effects on the performance of the insurance firms in Nigeria
1.4 Research Questions
The following research questions are raised for the study:
- What are the challenges of selling/marketing compulsory insurance services in Nigeria?
- What are the strategies for efficient marketing of compulsory insurance services in Nigeria?
- Do the strategies adopted for efficient marketing have significant effects on the performance of the insurance firms in Nigeria?
1.5 Statement Of Hypotheses
The following hypotheses are put forward for the study:
- HO1: The strategies adopted for efficient marketing have significant effects on the performance of the insurance firms in Nigeria
- HA1: The strategies adopted for efficient marketing have no significant effect on the performance of the insurance industry in Nigeria.
1.6 Significance Of The Study
The government and other institutions involved in the country’s policy formulation cannot overlook the insurance sector as one of the major contributor to the country’s GDP. The findings from this study will therefore be of importance because they will have the capacity of being used to formulate positive fiscal policies which are relevant and sensitive to the forces influencing the efficient marketing and performance of the insurance sector.
This study is significant in order to mitigate the frequent loss of money and life due to road accident on Nigeria roads. The frequent loss of property due to fire outbreak and motor accident is a challenge in Nigeria. This study is of utmost relevance to the current understanding of the dynamic nature of insurance and it significant impact to economic growth and development in Nigeria. It is sacrosanct for Nigerians to be aware that genuine insurance cover can improve the saving rate in Nigeria through indemnity of loss. Understand the role and functions of insurance companies and the process for filling genuine claim should also be known. Insurance companies indemnify individuals and companies who suffer loss in order to stabilize their financial position by transferring their risk to the insurance companies. Insurance also help to sustain demand and supply of goods which in turn encourages production and employment of large number of people.
Insurance companies employ people for the operation of it daily activities. This in turn helps to reduce the number of unemployment in the country. Insurance companies also help sustain production by indemnify clients who experience loss during the course of performing their job. For example, insurance company indemnify client who experience fire disaster by paying their claim which is used to reconstruct or rebuild the burnt structure. This is good for continuity of productive activities and sustenance of economic activities.
Small scale enterprises play a crucial role in development and have propelled industrial development in many countries. Insurance industry provides saving and back up to small scale industry in time of accident. This in turn helps to improve economic development in a country. Thus, insurance is a major tool to savings, economic growth and development in any country.
To insurance company management the realization that insurance business is one of the highly competitive business locally and globally calls for respective marketing department to adopt properly formulated marketing strategies for success of the company. To the insurance companies in the country, this study finding will be of great importance because through them, these institutions will be better positioned to gauge their performance and make improvements where necessary to boost their market performance and overall ranking in the industry.
To those who have scholarly interest in marketing of insurance companies and overall financial sector, this study will provide a source of reference; literature review and basis upon which further studies can be developed.
5.0 Conclusion And Recommendation
In the face of challenging economic times, pressing regulatory changes, and increased competition for market share, insurance companies in Nigeria are struggling to maintain their balance. The industry till date is characterized by low consumer patronage, high incidence of lapsed users, poor perceived sales force turnover and poor settlement of insurance claims. To provide solutions to the problems of the ailing industry, the study investigated the ―Effects of the Strategies for Customer Satisfaction on the Performance of Insurance Firms in Enugu Metropolis‖.
Out of the factors that are consistently identified in the literature as the strategies for efficient marketing of compulsory insurance services, most were most significantly adopted by Nigerian insurance firms for attracting customers. Out of the ten, seven were found to have positive effect on the performance of insurance companies in Nigeria. These are: prompt settlement of claims, quality products, fair premium, prompt attendance to customers’ complaint, use of easily understandable policy documents, timely and effective communication of renewal notices and thorough explanations of policies document. Three were found to have negative impact on the performance. These are: Staff-client cordial relationship, effective marketing communications to explain product benefits and insurance offices located close to customers.
The competitive landscape is shifting in the industry and will favor only those who capitalize on those strategies that have strong positive influence on customer satisfaction to improve the seemingly battered image and performance of the industry while deemphasizing expenditures in money, time and human resources on the less important variables.
Nigerians need to be educated on the importance of genuine insurance cover. This can be done through aggressive door to door marketing by insurance marketers, the use of social media, bill board, and referrals. The regulatory agency of insurance in Nigeria has to partner with the federal government of Nigeria to make insurance compulsory to all Nigerians. Genuine insurance should be made as one of the compulsory documents needed for every bank transaction, enrolment of students in all level of education and motorist should be educated on how to confirm the authenticity of their vehicle insurance through the National Insurance Industry Desk (NIID) website.
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